As the year comes to a close, many investors focus on holiday planning, taxes, and setting goals for the year ahead. But for thoughtful investors, December is also a critical time to review your portfolio.
At Providence Wealth Management, our founder, John O’Connor, CFP®, AIF®, emphasizes that year-end portfolio adjustments are not about chasing returns—they’re about seeking to preserve wealth, manage risk, and position your investments for the year ahead.
Here’s a comprehensive guide to making strategic adjustments before December 31.
1. Review Your Portfolio Performance
Begin by reviewing your current investments:
Identify top performers: Determine which holdings contributed most to your gains.
Spot underperformers: Evaluate whether these assets remain aligned with your long-term strategy.
Analyze allocation drift: Market movements can shift your portfolio away from your target allocation, increasing unintended risk.
This reflective review helps you understand what worked this year and where adjustments may be needed.
2. Rebalance Your Portfolio
Even a portfolio built with a disciplined long-term plan can drift due to market fluctuations. Rebalancing ensures that your portfolio continues to reflect your risk tolerance and investment objectives.
Example: If equities significantly outperformed bonds, your allocation may now be riskier than intended. Selling a portion of equities and reallocating to underweighted assets restores balance.
Benefit: Seeks to protect while maintaining exposure to growth opportunities.
3. Consider Tax-Efficient Strategies
Year-end is also an opportunity to optimize your tax position:
Tax-loss harvesting: Selling investments that have lost value can offset capital gains elsewhere in your portfolio.
Deferring gains: In some cases, deferring the sale of high-gain investments until the next tax year can reduce your tax burden.
Charitable giving through appreciated assets: Donating appreciated securities instead of cash can maximize your charitable impact while reducing taxable income.
These strategies seek to ensure your portfolio adjustments are not only strategic but also tax-efficient, protecting more of your gains.
4. Strategic Profit Taking
For positions that have experienced significant growth, consider ways to profit from gains without derailing your long-term plan:
Partial profit-taking: Sell a portion of an outperforming investment to capture gains while maintaining market exposure.
Diversifying into lower-risk assets: This can allow you take profits and still have some participation in potential market growth.
5. Don’t Forget Required Minimum Distributions (RMDs)
For investors in retirement accounts, year-end planning must include RMDs:
Who is affected: Individuals 73 and older (as of 2025 rules) with Traditional IRAs, 401(k)s, or other tax-deferred accounts.
Why it matters: Failing to take your RMD or taking the wrong amount can result in a 50% penalty on the shortfall.
Strategic planning: Timing distributions to minimize tax impact and coordinate with charitable contributions or other cash needs can help reduce your tax liability while meeting requirements.
John emphasizes that planning for RMDs is not just compliance—it’s a key component of year-end portfolio strategy.
6. Plan for the Year Ahead
Finally, reflect on your financial goals for the upcoming year:
Are your investments aligned with retirement, charitable, or legacy plans?
Should your allocation or contributions change based on expected life events?
How can you position your portfolio to balance growth, income, and risk in 2026?
Taking this time to plan ensures you enter the new year confident and strategically positioned for pursuing long-term success.
The Providence Difference
At Providence Wealth Management, we believe that year-end adjustments aren’t reactive—they’re disciplined, informed, and tailored to each client’s unique objectives. With John O’Connor’s guidance, investors can seek to take gains, manage risk, and approach the new year with clarity and confidence.
Takeaway:
December is more than a time to close the books—it’s a chance to reflect, adjust, and seek to protect your wealth. Review your portfolio, rebalance, implement tax-smart strategies, and plan for RMDs to ensure your financial plan continues to work as hard as you do.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification, asset allocation and rebalancing do not protect against market risk. Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs.
No investment strategy can guarantee a profit or protect against loss in periods of declining values.